50 F.3d 1298 (5th Cir. 1995), 94-30343, State of La. v. Litton Mortg. Co.

Docket Nº:94-30343.
Citation:50 F.3d 1298
Party Name:Bus.Disp.Guide 8800 STATE OF LOUISIANA, Plaintiff-Appellant, v. LITTON MORTGAGE COMPANY, Class Representative, and all other similarly situated mortgage servicing companies, Defendant, BISYS Loan Services, Inc., Class Representative, and all other similarly situated mortgage servicing companies fka Litton Mortgage Servicing Center, Inc., et al., De
Case Date:March 30, 1995
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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Page 1298

50 F.3d 1298 (5th Cir. 1995)

Bus.Disp.Guide 8800

STATE OF LOUISIANA, Plaintiff-Appellant,

v.

LITTON MORTGAGE COMPANY, Class Representative, and all other

similarly situated mortgage servicing companies, Defendant,

BISYS Loan Services, Inc., Class Representative, and all

other similarly situated mortgage servicing

companies fka Litton Mortgage Servicing

Center, Inc., et al.,

Defendants-Appellees.

No. 94-30343.

United States Court of Appeals, Fifth Circuit

March 30, 1995

Page 1299

Stephen L. Dunne, Robert L. Hackett, Kevin L. Camel, Hackett & Dunne, New Orleans, LA, for appellant.

Roger A. Stetter, Nicole D. Martin, Lemle & Kelleher, New Orleans, LA, for BISYS.

Monica T. Surprenant, Baldwin & Haspel, L.L.C., New Orleans, LA, for Magnolia Federal Bank.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before VAN GRAAFEILAND [*], JOLLY and WIENER, Circuit Judges.

PER CURIAM:

Plaintiff-Appellant, the State of Louisiana ("the State") appeals two district court orders, one granting the Defendants-Appellees' Litton Mortgage Company, Inc.--now BISYS Loan Services, Inc.--("Litton/BISYS") and Magnolia Federal Bank for Savings ("Magnolia") (collectively "Defendants") motions to dismiss the State's complaint for failure to state a claim, and the other denying the State's subsequent motion for leave to amend its complaint. The State asserts that the court erred in (1) dismissing its complaint on the ground that Section 10 of the Real Estate Settlement and Procedures Act ("RESPA"), 12 U.S.C. Sec. 2609(a), does not imply a right of private action, and (2) denying its motion to amend on alternative grounds: that the dismissal of the State's complaint constituted a dismissal of the State's entire action, and that the circumstances underlying the State's motion to amend--particularly the State's effort to resurrect an abandoned claim--did not justify allowing yet another amendment.

We agree with the district court's legal ruling that Section 10 of RESPA does not imply a private cause of action. It follows that the court did not err in dismissing the State's complaint for failure to state a claim under RESPA. With respect to the State's motion for leave to amend, we conclude that the court erred in denying the motion on the ground that the dismissal of the State's complaint constituted a dismissal of the entire action. We are satisfied, however, that this error is harmless by virtue of the fact that the court also addressed the merits of the State's motion to amend and did not abuse its discretion in denying that motion. We therefore affirm the court's order to that effect.

I

FACTS AND PROCEEDINGS

In November 1993 the State filed an action on behalf of Louisiana homeowners against Litton/BISYS and other similarly situated

Page 1300

mortgage companies, asserting claims under Section 10 of the RESPA, 1 the Racketeering Influenced and Corrupt Organizations Act ("RICO"), the Louisiana Unfair Trade Practices and Consumer Protection Act ("UTP"), and state antitrust laws. The State's action stemmed from the mortgage companies' alleged practice of requiring homeowners to deposit funds in mortgage escrow accounts in amounts that exceed the amount permitted by federal law or by the homeowners' mortgage contracts. Due to the number of common claims against numerous mortgage servicers, the State in its initial complaint sought to certify a class with Litton/BISYS named as class representative. Prior to an answer being filed, the State amended its original complaint to include federal antitrust claims.

After a preliminary court conference the State amended its complaint a second time, asserting only the RESPA and UTP claims against the defendants individually. Litton/BISYS and Magnolia filed motions to dismiss the complaint. The court granted these motions, concluding that Section 10 of RESPA does not provide a private right of action and declining to exercise supplemental jurisdiction over the remaining state UTP claim.

Following the court's dismissal but before final judgment was entered, the State filed two motions for leave to amend its complaint,--for the third and fourth times--asking to reassert the RICO claim, reinstate the RESPA and state law claims, and add additional defendants. The court denied these motions to amend, reasoning that, as the earlier order of the court had dismissed the State's entire action there was nothing left for the State to amend. The court also concluded that the State's attempt to reassert the abandoned RICO claim, when viewed in conjunction with other circumstances surrounding the case, was indicative at worst of possible bad faith or dilatory motive, or at best, of inartful pleading, thus providing the court with substantial reasons for denying the motions on the merits.

II

ANALYSIS

  1. STANDARD OF REVIEW

    We review de novo a dismissal of a complaint for failure to state a claim. 2 And, although we review a district court's denial of a motion to amend for abuse of discretion, 3 we review de novo that portion of a district court's denial of the motion to amend that rests on a question of law: here, whether the court's order constituted a dismissal of the State's entire action or merely dismissal of specific complaints.

  2. SECTION 10 OF RESPA

    The State challenges the order dismissing its complaint based on the court's conclusion that Section 10 of RESPA does not imply a private cause of action. Relying on the Cort v. Ash 4 standard for determining whether a private right of action may be inferred from a particular statute, the State insists that Section 10 clearly does imply a private cause of action. 5

    Page 1301

    Applying Cort 's four-part test to Section 10, the State reasons that (1) the plaintiff is a member of the class for whose special benefit the statute was enacted; (2) as Sec. 2609(a) does not provide any other remedy, the provision would be superfluous and ineffective without a private cause of action; (3) an implied right of private action is consistent with the purposes of the legislative scheme; and (4) even though injured borrowers could seek relief under state law, the likelihood of inconsistent results is high. The State glosses over subsequent cases in which the Supreme Court departed from Cort to conclude that the weightiest factor in determining whether a statute implies a private right of action is whether Congress intended to create one. 6 Moreover, the State apparently overlooks the fact that the absence of legislative history regarding Congress' intent to create a private right of action generally augurs against implying a private cause of action.

    The circuits are split on this precise issue. 7 After considering the opposing position of Vega v. First Federal Savings & Loan Association of Detroit, 8 we find most persuasive the Seventh Circuit's well-reasoned opinion in Allison v. Liberty Savings. 9 In reaching its conclusion that Section 10...

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